Article

Aviation Regulation in The United States: A Look Back At 2016

December 2016

In this article, Anita Mosner from Holland & Knight explores the development of regulation in the US aviation sector over the past year.

Although airline passenger rights are perennial regulatory and media attention-grabbers, 2016 saw especially significant aviation regulatory activity and change. In an effort to bolster its legacy, the Obama administration in late October announced several new airline consumer rights rulemaking actions. Moreover, the US Department of Transportation (DOT) earlier this year abandoned its standard “notice and comment” rulemaking procedures and engaged in a regulatory negotiation (reg-neg) in an effort to break the impasse between airlines and advocates on key disability rights proposals. This piece highlights each of these noteworthy initiatives. At the time of writing, however, Donald J Trump has just been elected as the 45th president of the United States. Given his anti-regulatory sentiments, the future status of the regulatory proposals that are provisional and or exploratory are very much open to question. We would expect the regulations that have been issued in final form to remain in force.

New Airline Consumer Regulatory Actions.

The DOT package of airline consumer protection rulemaking documents follows three earlier administration initiatives in this area: Enhancing Airline Passenger Protections (EAPP) I, and EAPP II – which were promulgated in final form in 2009 and 2011, respectively – and a third sweeping initiative, EAPP III, which was proposed in May 2014, but had stalled for more than two years. While some of the original EAPP III proposals were fairly mundane (eg, requiring the codeshare affiliates of large US carriers to report their on-time performance data, just as their large airline partners do) others were much less so, such as proposals that treat as “ticket agents” companies that merely display information about air fares, but do not permit bookings. The EAPP III Notice of Proposed Rulemaking (NPRM) triggered such controversy that the DOT had to shelve and re-evaluate the proposal. In an effort to put the less controversial parts of the package in effect before the end of the administration, the DOT issued a scaled-back version of the EAPP III NPRM in final form, and published the remaining parts of the rule for public comment. As part of these initiatives, the DOT has issued:

an EAPP III Final Rule in scaled-back form;

a Request for Information regarding airline restrictions on the distribution and display of flight schedules and fare information (part of the original EAPP III package);

a Final Rule which requires US airlines to report statistics for mishandled wheelchairs and scooters used by disabled passengers; and

an Advance Notice of Proposed Rulemaking (ANPRM) requesting comments on how airlines should refund checked baggage fees when they fail to deliver passengers’ baggage in a timely manner.

Although it was not part of the formal package, the DOT also announced its plans to issue a Supplemental Notice of Proposed Rulemaking on parts of EAPP III that triggered the greatest controversy: the disclosure of ancillary services fees to consumers at all points/channels of sale, including global distribution systems (GDSs), and the required provision of airline fare data to such providers. The DOT will also issue at a later date a final rule covering the proper definition of “ticket agent,” customer service commitments by large ticket agents, and the prohibition of post-purchase price increases for ancillary services and for “mistaken fares.”

EAPP III

New Service Quality Reporting Requirements:

Over the years, the DOT faced complaints from Congress and the public about the lack of availability of service quality data concerning smaller US airlines. Under existing rules, only US carriers that account for at least 1 per cent of domestic scheduled passenger revenue are required to submit such reports. Under EAPP III, the class of reporting carriers will be expanded to apply to airlines that account for at least 0.5 per cent of domestic scheduled passenger revenue. Specifically, smaller carriers meeting the reporting threshold will be required to: submit on-time performance and mishandled baggage reports to the DOT; post their on-time performance of their flights on their websites; and submit oversales/denied boarding data to the DOT.

In a similar effort to capture information about the operations of smaller carriers, the DOT is now requiring all US carriers that market domestic scheduled codeshare flights operated by another US carrier (ie, the large network airlines that have codesharing relationships with smaller airlines) to file separate on-time performance reports for flights that are operated by a non-reporting carrier, regardless of their size. Similarly, large network carriers will have to provide monthly mishandled baggage reports and quarterly oversales reports that contain the data for all reportable fee-for-service flights that they market. In an effort to provide a wider range of consumer information, the DOT has also expanded the definition of “reportable flight” to include flights operated to all airports in the on-time performance and mishandled baggage reporting requirements (previously, only flights to large and medium-sized airports were covered by the rule). The new reporting requirements will take effect in early 2018.

Displays and Disclosures Relating to Codeshare Service:

The DOT and the US Congress have expressed ongoing concern that passengers who purchase a ticket involving a codeshare arrangement are often not fully aware of the identity of the carrier that will actually provide the flight service, and any differences in the equipment, policies, or procedures of the smaller carriers that provide services on behalf of their large codeshare partners. EAPP III both codifies existing (but uncodified) DOT enforcement policy, or strengthens existing codeshare disclosure requirements.

Prohibition of Undisclosed Bias

EAPP III adds an entirely new Part to the DOT Aviation Regulations. The regulations (to be codified at 14 CFR Part 256) concern electronic airline information systems, which are “systems that combine air carrier or foreign air carrier schedule, fare, or availability information for transmission or display to air carriers or foreign air carriers, ticket agents, other business entities, or consumers.” Under the new rule, operators of such systems which display the flights of multiple carriers are prohibited from offering displays which have undisclosed biasing based on carrier identity. The rule applies to ticket agents’ websites as well as airline and airline alliance websites. It also applies to corporate booking tools, but is limited to undisclosed bias that is not based on contractual arrangements.

Final Rule on Reporting of Data for Mishandled Baggage and Wheelchairs and Scooters

Although US airlines are currently required to file reports about mishandled “baggage”, the new regulation requires US airlines to provide specific information about mishandled wheelchairs and scooters carried in the cargo hold. Among other things, the rule requires carriers to report separate statistics in their mishandled baggage reporting for mishandled wheelchairs and scooters, and covers items subject to “loss, delay, damage, or pilferage”. Covered US carriers will need to comply with these new requirements in early 2018.

The ANPRM on Baggage-Fee Refunds for Delayed Checked Bags

This summer Congress enacted the FAA Extension, Safety, and Security Act of 2016 (the Act), which among many other things directed the DOT to issue a rule requiring air carriers to provide refunds to passengers for any fee charged to transport a bag if the bag is delayed, specifying that US and foreign carriers must “promptly provide an automated refund for any ancillary fees paid by the passenger for checked baggage if the carriers fail to deliver the bag to passengers within 12 hours of arrival for domestic flights and within 15 hours of arrival for international flights”. The Act also allows the DOT to extend these time frames to up to 18 hours for domestic flights and up to 30 hours for international flights, if the DOT determines that the 12-hour or 15-hour standards are not feasible and would adversely affect consumers. To better gauge the feasibility of these possible requirements, the DOT has issued an ANPRM requesting consumer and airline comments on this issue.

Request for Information on Airline Industry Practices on Distribution and Display of Fare, Schedule, and Availability Information

As noted above, the DOT previously considered whether carriers should be required to provide information concerning their ancillary fees to online travel agents, GDSs and metasearch engines, regardless of whether the carrier has contractual relationships with such enterprises, and encountered a firestorm of criticism. Aware of the controversy, the DOT has requested industry comments on whether restricting access to fare and schedule information prevents consumers from comparison-shopping, and is therefore an unfair and deceptive practice. Given the opposition of US carriers to this initiative, we would expect the carriers to lobby the Trump administration to discontinue this query shortly after the beginning of the new administration.

The DOT’s Regulatory Negotiation

As the previous discussion should make clear, the rulemaking process in the US can be long and arduous. Regulations pertaining to passengers with disabilities have been especially contentious.

In an effort to break a regulatory deadlock, the DOT in late 2015 announced a new and uncharted regulatory approach, appointing a professional neutral party to determine whether there might be areas in which disability rights advocates, carriers, service providers and other experts might achieve consensus. The neutral expert was initially asked to explore the initiatives including:

accessible in-flight entertainment (IFE);

provision of in-flight medical oxygen;

the appropriate definition of a “service animal” and prevention of passengers falsely claiming that their pets are emotional support animals;

provision of accessible lavatories on new single aisle aircraft; and

requiring airlines to report the number of requests for disability assistance they receive, and the time period within which wheelchair assistance is provided.

After conferring with stakeholders, the neutral expert reported that consensus might be possible in three areas – accessible IFE, the proper definition of service animals (and safeguards to prevent abuses), and the accessibility of lavatories on single-aisle aircraft. Based on this report, the DOT appointed teams of experts in each area to meet for six multiple-day periods over the course of several months, and to seek consensus, with the goal of creating well-developed regulatory proposals that could be promulgated and implemented quickly by the DOT.

While the parties came prepared to seek consensus, it quickly became clear that the negotiators were sharply divided on the issues under consideration, as well as the ground rules of the process. The disagreement was especially acute in the area of IFE, with disability advocates arguing for full accessibility of all systems, and with carriers saying that proposals being tabled were neither feasible nor affordable, and that passengers were increasingly reliant on their own personal entertainment devices (making the issue of declining relevance). Issues concerning the carriage of service animals were especially contentious, given that many nations have rules concerning the carriage of service animals that are far more restrictive than those of the United States as to the nature and species of animals to be carried.

As of this writing, the negotiators have reached consensus only on the issue of accessible lavatories. Discussions regarding service animals resulted in stalemate and talks on IFE have yielded only an agreement in principle at this point. The DOT has (informally) indicated that it will develop and issue its own proposed regulations pertaining to the carriage of service animals, and on IFE if final agreement is not reached. However, given the complexity of the issues involved (and the election of Donald Trump), it is unlikely that we will see any concrete action as a result of reg-neg before mid-2017, and very likely later than that.

Conclusions

Although the initiatives described herein might appear at first glance to be “cut and dried,” the regulation of airline consumer service has been of constant and intense regulatory, Congressional and public scrutiny. Although the Obama administration has been unabashedly pro-consumer, the next 12-18 months should indicate whether or not the policies of the Trump administration will reflect a change of course and priorities, or whether the needs and demands of airline passengers will continue to command centre stage.

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